Cardano’s Utility Goes Right Out the Window

Cardano (CCC:ADA-USD) is one cryptocurrency I believe has some honest to goodness utility. But, unfortunately, that doesn’t seem to matter one bit, given current market conditions.

The Cardano (ADA) token with other gold and silver tokens in the background.
Source: Shutterstock

I read an article from today entitled “4 Good Reasons to Sell Stocks Now.” I won’t get into the details. However, these are the kind of conversations individual owners of stocks are having with themselves at the moment.

After so long with almost no volatility, the downward movement of the markets has people freaked out. At least with stocks, you can throw out financial numbers and metrics to justify hanging on to your holdings.

The same can’t be said for Cardano and the rest of the cryptocurrencies out there.

While I can hypothesize about Cardano’s utility, the reality is I have no actual confirmation of it. Not really, anyway. At least with stocks, I can see that a company flush with cash and no debt has a fortress against uncertainty. That makes it easier to hold on during the tough times.

Given the argument that Cardano’s utility appears to have gone right out the window, I wonder if there is anything long-time holders can hang their hats on as we go through this current rough patch.

I have a couple of ideas.

Cardano Could Come Back

I’m grasping at straws when it comes to rationalizing why someone should continue to hold Cardano at $1.02 when they paid $3 in September. A 66% haircut over four months is never a fun time.

However, at this point, unless you’ve got mouths to feed, selling now would merely provide you with a capital loss and not much comfort. For example, if you bought 1,000 ADA-USD coins in early September, your $2,960 investment is now worth $1,020. Selling would create a $1,940 capital loss, which can be applied against any capital gains in the future.

If you held to $0, your capital loss would be $2,960. So what’s another $1,020 when you were prepared to hold forever? Given the price movements of most cryptos, including Cardano, it just seems silly to bail at this point.

Worst-case scenario, you get a lesson about investing that will help you for a lifetime. Best case, it returns to $3, and you’re whole once more.

At this point, I don’t think anyone knows if Cardano is down for the count or not.

Cardano Plays to a Different Crowd

InvestorPlace’s Faizan Farooque pitched an idea recently why Cardano is different. Honestly, it’s not one I’d thought about, but it has merit.

My colleague believes that the blockchain network’s focus on academia and nonprofits sets it apart from other coins. It also helps it possesses technological advantages over many of its competitors.

And while he doesn’t get into the specifics of this focus, I’ve discussed the blockchain’s work in Ethiopia in past articles, and it’s clear as day that Input Output Hong Kong (IOHK) CEO Charles Hoskinson has an affinity for working with organizations that want to better their situations through the use of blockchain.

As I said in November, Cardano’s key to victory is going where others won’t. Its project to create a digital identity system for the entire Ethiopian nation perfectly fits that description.

They call this Cardano’s “unique selling proposition” or USP in the sales and marketing world. It’s what sets you apart from your competitors.

At this point in blockchain development, I’m sure all the participants are looking for enough partners and projects to keep them busy and justify their existence. However, Cardano does appear to stand out from the rest. Back on Nov. 3, 2021 I wrote:

The important thing is that Hoskinson and the rest of the IOHK team continue to think about the bigger picture. Ultimately, some of what it tries is going to go nowhere, failing miserably. Maybe Atala Prism will face the same fate.

Or, optimistically, by the end of 2021, Ethiopia will have a fully-functioning blockchain-powered digital identity system.

I’ve yet to hear any further news about the project. I still remain hopeful.

The Bottom Line

The current environment is not good. Who in their right mind would commit capital at this point, knowing that cryptocurrency assets are correlated to stock prices?

“It appears as though the whole market is simply correlated to equities now,” CoinDesk reported the comments of Laevitas, a Swiss-based derivatives platform. “So it will be interesting to see how that evolves with the [U.S.] Federal Reserve looking increasingly likely to raise rates faster.”

As I said, it appears as though Cardano’s utility has gone right out the window. So until investors find their footing, I’d be hesitant to recommend buying any cryptocurrency.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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